Scrambling to get by on $400K/Yr in NYC

[Maurice]

Quote:

Originally Posted by NW-Bound So, how do they spend their $400K yearly income? Here's what I got from the article Gross = $400K Taxes = $200K Housing = $100K+ Child care = $40K+ Preschool = $15k This leaves them with $45K for all other expenses -- medical, food, transportation, etc... -- which, even an ignoramus like myself knows, does not get them far in NYC.

Interesting article, thanks for posting that. I live in NYC, and while I make more than they do I live on quite a bit less. I bought a similarly-priced apartment (~1M) but the monthly cost for me was <$5k (I've since paid it off).

I think their big problem is housing. They are probably in a building with a huge common charge - so its like paying rent on top of your mortgage. There are plenty of nice areas in Manhattan and the gentrified parts of Brooklyn where they could get a nice 2 bedroom place at a much lower carrying cost.

Of course the preschool expense can be avoided, there are some well regarded public schools if you live in the right place. But some people in the city have a real aversion to the idea of public schools - really its more about status than education. Even so, they could probably absorb that if they were a bit smarter about their housing choice.

[LOL!]

I would not be surprised to find out the reporter lived in NYC and this article was written to make all other New York City dwellers feel smarter about their financial decisions. No one wants to be on the bottom of the totem pole and articles like this help appease the low income masses and show that at least on one sort of totem pole, they are not at the bottom. "At least we are 'a bit smarter about' our money than these chumps!"

-- written tongue-in-cheek with apologies to Maurice and the other New Yorkers reading this.

[Independent]

I don't live in NYC, but had to wonder about $200k taxes on $400k of income. I'd estimate these numbers:
$80k - FIT
$16k - FICA (assuming the $400k is wages)
$28k - State Income tax
$14k - NY City Income tax
-----
$138k Total

[Maurice]

Federal income tax would be well north of 20%, don't you think?

The dentist probably pays both halves of FICA.

But still the 200k is probably rounding up.

[FIRE'd@51]

Quote:

Originally Posted by Maurice Federal income tax would be well north of 20%, don't you think? The dentist probably pays both halves of FICA. But still the 200k is probably rounding up.

I would agree. I estimate that their Federal income taxes would be about 107K if they took the standard deduction, but I would think that their sched A deductions would probably exceed the standard deduction.

Plus, there's property taxes on their condo. And the 8.5% city sales tax.

Also, I estimate the FICA tax to be:

0.062 x 102,00 x 2 = 12,648

plus the Medicare tax which applies to all income

0.0145 x 400,000 = 5,800

so the FICA tax would be 18,448 (higher than Independent's number) + any self-employment tax the dentist wife has to pay (another 9,224)

It seems to me it would make sense for these folks to move to a suburb with good schools. That way, at least the property taxes would be deductible, whereas their private school tuition is not.

[LOL!]

If the dentist is smart (there's that word again), she would be sheltering lots of money in tax-advantaged retirement accounts. So would Mr Dentist. Such accounts would certainly reduce taxable income, but $400K was reported as "gross", so maybe they are really putting $200K a year into retirement vehicles and secretly laughing at the fast one they put over on the the reporter.

Federal income tax might not be well north of 20% given the tax shelters that are available for self-employed folks. We've certainly never paid more than about 17% at the most ever even while being in the 33% marginal income tax bracket. I know they state a higher gross than we've ever had.

And you forgot to add in their property taxes.

[Independent]

I was guessing $300k of taxable income. I got that by estimating:

$400k Gross
-$14k Personal exemptions ($3,500 x 4)
-$42k State and City income tax
-$44k Interest and property tax on condo (out of $100k of condo expense)
------
$300k Taxable income

The FIT calc is $45k + .33 x ($300k - $200k) = $45k + $33k = $78k
I'm guessing that I'm pretty conservative on the itemized deductions. I checked the "limits on itemized deductions" worksheet, it doesn't seem to have much impact.

You are correct about Medicare - I forgot it was payable on total earned income.

I was assuming that his estimate of "taxes" was "off-the-top", and real estate taxes would be in the condo expenses, and sales tax is just part of spending. I know that some people categorize differently, he could be one of them (no telling how precise an MIT grad could be).

I also assumed that they weren't contributing any large percent of income to tax-favored retirement plans - since they seem to be "just getting by".

[randyman65]

I ran the numbers through paycheckcity and with a mortage deduction (on a percentage of the coop) I would put their take-home at closer to $240k. Their housing expenses are $100k, which is not out of line at 25% of gross.

The most glaring point is that they don't want to live like New Yorkers - they want to live like rich New Yorkers. NYC is an expensive place to live, but almost exclusively because of housing. If we exclude the $100k for housing, their take home is still $100-14k - plenty for a family of four who are not trying to lead a pretentious life.

While NYC can indeed be expensive, I can also find things cheaper here than other areas of the country, but I can't do it on the UES and I can't do it without some legwork.

People live in NYC on less than $30k/year. But they don't live on fifth avenue, they don't send their children to private school, and they don't eat at expensive restaurants when they go out. The sheer number of restaurants in NYC almolst guarantees choices at every price point, and price is not always an indicator or quality in this city.

Those who wish to live in NYC do so because it offers what few other American cities do - a vibrant culture, a walkable city, and the choice of many different environments. Those who talked about staying in Times Square to "really be in the middle of things" are kidding yourselves. Times Square is closer to Orlando than NYC.

[Texas Proud]

I lived in a $1 mill apartment on the upper west side... but my company paid for it... but IIRC, there are not that many people who actually LIVE in Manhattan...

My commute was in the 35 to 45 minute range as I had to take two subway trains and the PATH to NJ... or walk a long block and a half after one subway to the PATH... you could get a nice place in NJ for a LOT less than what they were paying..

Also, there was a Costco and a nice mall located on the Jersey side near the PATH...

I would never try and stay in the city if I had kids... just to much trouble..

[haha]

Quote:

Originally Posted by Texas Proud but IIRC, there are not that many people who actually LIVE in Manhattan...

Apparently 1,620,867 is the population of Manhattan.
Manhattan - Wikipedia, the free encyclopedia

In spite of so many people feeling that it is just beyond comprehension that one would actually live there, it seems that quite a number do.

In my life I spent one short summer there, in the Village, and I think it is like many things. Sure you can go there from somewhere else whether Brooklyn or Queens or Yonkers or New Jersey or wherever one might feel that it is reasonable to live(or where other people may feel that it is reasonable for humans to live). But it is not nor ever will be the same.

If you like beaches best, live at the beach. I can attest that beachwise it is a totally more satisfying experience than living in Pasadena and struggling down to the beach on occasion.

If you like hip parts of big cities, live there. If you like utter posh live on Fifth Avenue. If you like Brooklyn, live there. If you like a quiet small town find one.

Ha

[Dennis]

Makes $400k and pays $200k taxes? Somethings wrong with that picture..
but just watch the Cable Show> Housewives of New York to get some ideas of Living the Higher Life in NYC..
Living in London is alot more Expensive I think..
and their, you pay 50%+ in taxes...!

[kumquat]

Quote:

Originally Posted by Dennis Makes $400k and pays $200k taxes? Somethings wrong with that picture..

Canada isn't that far off, or wasn't a few years ago. Top marginal income tax rates exceeded 50% in my province. Add sales tax, property tax, gas tax and a few others, I can see it.

[clifp]

Not much to add. Still it definitely remains of the book Bonfire of the Vanities. At some level I think they would step back and say we make 400K and we life in a very cramped 800' apartment with the 2 kids. You don't have to have the highest status/best in every aspect of your life, your address, your food, nanny, Pre School etc.

If they aren't saving money at a decent rate (at least 20K/year) they are fools.

[RonBoyd]

Quote:

Originally Posted by clifp At some level I think they would step back and say we make 400K and we life in a very cramped 800' apartment with the 2 kids. You don't have to have the highest status/best in every aspect of your life, your address, your food, nanny, Pre School etc.

Like I said, the same struggle everyone goes through at that age. It would be interesting to see who wins the battle... them or life. (Well, maybe not. I think we all know how this tale is going to end -- the harder you push the harder the world pushes back.)

what just came to mind was the ol' definition of Bankruptcy -- the end of a dream.

[unclemick]

Tonganoxie, Kansas before the curve - but keep it under your hat before it gets discovered.



heh heh heh -

[RonBoyd]

Quote:

Originally Posted by unclemick Tonganoxie, Kansas before the curve - but keep it under your hat before it gets discovered.

Like Colorado in the 60's:

Bring your money
Bring your dope,
and we all sincerely hope
that you don't forget to leave here when you're done.

(Hmmmm... that still holds true today.)

[lhamo]

Though prices have gone up since we lived there, you can still get a beautiful 3-4 br co-op in a historic building in Jackson Heights for well under a million, with monthly fees of less than 1000/month. There is a beautiful listing in the NYTs of a duplex 4br on our old block that they are asking $698k for -- it has been listed for ages so that price is probably too high. There are also lots of cheaper options -- tons of 3-4 brs in the 600k range, and plenty of decent 3brs in the 500ks. There's even one 3br on our old block, same layout as our old place, listed for $467k -- needs work, though.

The commute is not that bad -- 20-30 minutes to midtown, 40-50 minutes downtown. Nannies are cheaper out there, too. The Garden School is a decent preschool-private school in that neighborhood with much lower tuition than the Manhattan elites -- only 13k/year. Our neighbors sent their pre-schooler there and really liked it. Im sure it is at least as good as a decent suburban school.

Life is all about choices. These people sound like they might be book smart but seriously lack common sense. For god's sake, if they must stay in Manhattan why not at least consider moving uptown or downtown -- is Fifth Avenue life really that great? I'd be happier on a side street, myself. Who wants to live on a main arterial? Just did some quick browsing on one of the major NYC agents' websites and found a 2 br rental off fifth avenue near Bryant park for $4500/month -- maybe they should consider selling and renting, which would at least bring their housing costs down to a more reasonable ratio to their take home pay.

Choices, people, choices. You can't have everything all of the time. If she is a sole proprietor couldn't she have her business anywhere? Her takehome might be a little less if she couldn't charge Manhattan rates, but their living expenses could go way down, too. He might have to commute a bit further, but I woner how much time he spends at home as it is. Employers will often be more amenable to a WAH situation, even part time, if you have a long commute.

lhamo

[randyman65]

This is another case which illustrates the canard of "the American Dream". This pair bought a $1 million apartment in a city where renting is perfectly acceptable. They are paying $100k/yr for an 800 sq ft apartment, when they could rent a 2400 sq ft, 3 br place nearby for $5000 per month. This is an example of how the unfailing belief in the housing market has unreasonably skewed housing prices. If this same couple were to rent, they would have at least another $40k in their pockets each year.

Three administrations of politicians have put the economy in the toilet pushing the "American Dream".

[ziggy29]

Quote:

Originally Posted by randyman65 Three administrations of politicians have put the economy in the toilet pushing the "American Dream".

Agreed. And we've bought the myth that each generation has to live better than their parents as if it's some sort of birthright or economic law. Pursuing that in the headwinds of global economic changes and over the last several decades has led to this debt-fueled mess.

[wrigley]

Quote:

Originally Posted by NW-Bound We have had a few threads or posts about how people in NYC need huge salaries just to survive there, due to the high cost of living. People like me who have spent the entire life in backward places like AZ just couldn't understand it. However, I just ran across an article that sheds more light on this. The subject of this Web article is a highly-educated married couple perhaps in their late 30s. With the husband having a doctorate from MIT, and the wife a dentist with her own practice, they make $400K/yr. Yet, they are scrambling to get by with their 3-yr old and a 9-mo old in a 800-sqft one bedroom apartment. This apartment, being on 5th Avenue, still has a price tag of $1M, and costs them 1/2 of the take-home salary. But more on this later. Instead of going to the movies, they rent videos. Restaurants are reserved for once-a-quarter special occasions, rather than their monthly date nights. They now buy necessities at Wal-Mart and spend more time surfing the Web for sales than ever before. Despite their income, Fou says he and his wife have little in savings and certainly not enough to support the family for any length of time should one of them lose a job. Nearly every dollar they earn is spoken for. So, how do they spend their $400K yearly income? Here's what I got from the article Gross = $400K Taxes = $200K Housing = $100K+ Child care = $40K+ Preschool = $15k This leaves them with $45K for all other expenses -- medical, food, transportation, etc... -- which, even an ignoramus like myself knows, does not get them far in NYC. Fou still plans to take the family on a winter vacation this year. He wants his son to get on his first pair of skis. But instead of flying to Colorado, they'll probably rent a car and drive up to Vermont for a long weekend. It's unlikely they will visit their families in Texas anytime soon, given the cost of airfares. So Fou purchased a webcam to ensure the grandparents can still see the kids regularly, albeit virtually. So, why do they choose to live there? "We grew up in Dallas and Houston, respectively, and we just couldn't see ourselves living in the suburbs." For a view of the 800-sqft $1M one-bedroom apartment for a family of 4, see video below. See inside a 5th Avenue apartment - MSN Video The full article is here. Getting by on $400K

bs !